International investment bond is a Guernsey-based unit-linked bond, which is aimed at non-UK residents. It is designed for growth by investing in a range of actively managed funds, tracker funds and ethical funds from a variety of sectors.

The panel first assess how the bond fits into the market. Macfarlane says it is plain vanilla and little different from other similar bonds. On this basis he thinks it will slot in but not make any impact. Both says: “It is unusual in that it offers a with-profits fund to the offshore market. A choice of charging structures is good, although it might struggle to fit in with Sandler&#39s recommendations.” Bloom and Cuthbert think that because the bond is for non-UK residents, the market is probably limited for brokers who do not have offshore clients. Laird says: “It appears to be a straight replacement for the existing offering with a few tweaks here and there.”

Commenting on the type of client for whom the bond is suitable Both says: “The more passive offshore investor, who still has faith in with-profits funds.” Macfarlane considers investors with varying attitudes to risk. Bloom says: “Expatriate clients seeking a traditional bond utilising offshore advantages, like tax-free investment roll up.” Cuthbert says: “Capital rich expatriates and foreign nationals living outside the UK.”

Moving on to the sorts of marketing opportunities the bond will provide Bloom says: “Friends Provident International has a good name and expatriates should find this a useful product.” Macfarlane thinks very few because it is much like all the other bonds and it is just a revamp of the old contract. Laird says: “We are in the process of expanding our business with expatriates, but this product is not attractive enough to encourage us to market it specifically.” Both says the Sandler review of insurance bond taxation will not increase its marketability. However, Cuthbert says: “Clients who are about to move abroad for some years or clients who may decide to retire abroad.”

The panel consider the main useful features and strong points of the bond. Bloom says: “Access to offshore with-profits funds is sometimes limited, so a with-profits option is a strong recommendation, notwithstanding ill-informed media coverage and regulatory criticism of the genre.” Laird says: “Clients have the choice of paying an upfront charge or spreading the charge over the life of the investment. The choice of four model portfolios will be attractive to some.” Cuthbert highlights the tax-free growth on funds and a good range of investment portfolios and funds. Both says: “The with-profits fund is the only special feature, everything else is distinctly run of the mill.” Macfarlane favours the two different charging structures and the loyalty bonus option.

Turning to the bond&#39s bonus rates Cuthbert says: “I can&#39t comment on with-profits bonus rates as they are not shown in the literature.” Both says the massive uncertainty over equity values and interest rates means that future rates can only be a wild guess. Macfarlane says: “Should the investor choose the loyalty option charging structure, a loyalty bonus payable after five and ten years has been designed to take the bad look off the excessively high charging structure.” Bloom thinks it is too early to make a judgement. Laird says: “About average for an offshore with-profits fund. According to the website, the series 1 offshore with-profits fund achieved 37.6 per cent growth over the past five years &#45 I doubt it!”

The panel next consider the bond&#39s disadvantages. Both says: “The less than clear charging structure, narrow choice of external funds (via the open manager portfolio fund only) and the lack of brand awareness in the offshore market.” Macfarlane reckons the bond has nothing new to offer and would be expensive on early encashment. Laird says: “If you&#39ve invested in the protected global growth fund you may, in exceptional circumstances, have to wait up to three months to receive the proceeds of any encashment and there are no other external fund choices apart from this one.” Bloom and Cuthbert think the main one is that it is not available to UK residents.

Looking at the flexibility offered by the bond, Cuthbert says it is about par for the course, while Both says: “It is unusually poor for an offshore bond, especially now that Friends Provident has bought the Royal & SunAlliance brand, which includes some extremely flexible plans.” Laird thinks flexibility is improved because up to 999 clustered policies are available and there are now 12 free switches a year. Bloom says: “It is not as flexible in the range of funds as some bonds, but I would think it is adequate for most clients.” Macfarlane finds the fund diversity and switching excellent, but says the high exit penalties reduce flexibility.

Friends Provident International&#39s reputation is under the spotlight next. Both says: “Far less known than most of the existing players, it needs to do something special to enlarge its niche and this isn&#39t the product to do it.” Laird says: “It wouldn&#39t be my first choice of offshore life company. I hope the acquisition of Royal & SunAlliance International will change it for the better.” Bloom says: “It doesn&#39t really have one yet! Cuthbert says it is a good company.

The panel next comment on Friends Provident International&#39s past performance record. Both feels it is mediocre at best, based on Standard & Poor&#39s consistency data. Cuthbert and Macfarlane say it is particularly good in the ethical sector. Laird thinks it is dismal, citing the example of its managed fund which is fourth quartile over the past three years.

When asked which products they see as the main competition to this bond, the panel mention the bonds from Royal Skandia, Canada Life International, Clerical Medical International, the Former Royal & SunAliance International products, Scottish Equitable International, Axa International, Norwich Union International, Pan Euro LifeThe bond&#39s charges are analysed next. Both thinks they are a little on the high side. Cuthbert agrees, especially when compared to UK investment bonds. Macfarlane says the reward option is especially punitive with a high initial charge and early encashment charge. However, Bloom thinks they are competitive except for the discontinuance charge, which newer providers like Pan Euro Life do not charge. Laird says they are at the lower end of the offshore spectrum.

The panel then move on to the commission structure of the bond. Both says: “There is a good range of options, although it would be better if we could agree terms with the client and have the provider adhere to them. For example, a fixed initial fee and agreed fund-based renewal commission.” Bloom and Laird think the commission is fair and reasonable. However, Macfarlane says: “Commission on the contract is too high, bearing in mind current market conditions. But commission can be rebated to enhance a client&#39s investment.”

Finally, the panel give their opinions on the product literature. Both says it is less than expansive. Macfarlane thinks it is the best part of the package, well presented and attractive. Bloom says: “It is high quality but slightly old fashioned.” Cuthbert thinks it is well set out, clear, easy to understand and quite attractive. Laird says: “There&#39s a lot of red in it. I felt I was reading a Labour Party manifesto. It&#39s well laid out and reasonably clear, though.”

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